Banner Image

Consolidation

Overview

A Direct Consolidation Loan combines multiple Federal student loans into one loan from a single loan holder, which is then used to pay off the balance on your other student loans. The result is a single monthly payment instead of multiple payments. There is no application fee to consolidate your Federal student loans into a Direct Consolidation Loan, and you may prepay your Direct Consolidation Loan at any time without penalty.

Carefully consider whether loan consolidation is the best option for you. Once a Direct Consolidation Loan is made, it cannot be unmade. A Direct Consolidation Loan can simplify loan repayment and lower your monthly payments by extending repayment terms and giving you up to 30 years to repay your loan. Keep in mind, however, that extending repayment terms can also significantly increase the total cost of repaying your loans.

Most Federal student loans, including subsidized and unsubsidized Direct Loans and Family Federal Education Loans (FFEL) and PLUS loans, are eligible for consolidation. A Private education loan is not eligible to be consolidated. 

To find out if consolidation is right for you, please consider the Pros and Cons of consolidating your Federal student loans.

Consolodation Chart

PROS CONS

Multiple Federal student loans are combined into one loan with one monthly payment. This makes the repayment process easier.

If you consolidate your loans during the grace period, you will begin repayment immediately. You may lose the remainder of your grace period and possible interest benefits on a subsidized loan. 

Consolidation provides access to multiple repayment plans. The terms of a repayment plan depend on the balance of the loan, which is higher on a consolidation loan.

The longer the repayment period on your consolidation loan, the more interest you will pay which will increase the amount paid over the life of the loan.

Monthly payments are lower for a consolidation loan because the repayment period is longer.

Variable interest rates change annually. If you consolidate your variable interest rate loans and then the interest rates drop, you will still be locked into the higher fixed interest rate for the life of the loan.

Consolidating variable interest rate loans when the interest rate is low can save money.

You may not be eligible to receive the same deferments on your consolidation loan that you were eligible for on your original loans.

Consolidating an 8.5% fixed rate PLUS loan reduces the interest rate by .25% because the interest rate cap on a consolidation loan is 8.25%.

You may lose any borrower benefits that you are receiving on your loans from your current loan servicer. Borrower benefits may include interest rate discounts, principal rebates, or some loan cancellation benefits offered under non-consolidated repayment plans.

Consolidation resets the 3-year clock on certain deferments and forbearances. A consolidation loan is a new loan with its own new set of deferments and forbearances.

You can only consolidate once.

Consolidating your loans allows you to switch loan servicers. You may be able to find a loan servicer with better borrower benefits.

Private education loans are not eligible to be consolidated into a Direct Consolidation loan. 

You can consolidate your FFEL Program loans into a Direct Consolidation loan. This may allow you to have different options for repaying your loan and different forgiveness programs.

 

If your loan is in default, you may be able to consolidate your loan after making satisfactory repayment arrangements with the holder of your defaulted loan. If you consolidate those loans, benefits that were lost when your loan was placed into default are reinstated. These benefits include deferment, forbearance and eligibility to apply for additional Federal financial aid. 

 

Requirements to consolidate

To qualify for a Direct Consolidation Loan, you must meet the following eligibility criteria at the time you apply for the consolidation loan:

  • You must be in the grace period or have entered repayment on each loan chosen for consolidation.
  • If you want to consolidate a defaulted loan, you must either make satisfactory repayment arrangements with your current loan servicer, or you must agree to repay your new Direct Consolidation Loan under an income-sensitive repayment schedule.

Consolidation repayment calculator

A consolidation repayment calculator can be used to help determine your monthly payments.

Applying for a consolidation

When applying for a Direct Consolidation Loan, you can choose the loans you want to consolidate and the consolidation servicer. After you have completed your application, the consolidation servicer selected will complete the actions required to consolidate your eligible loans. The consolidation servicer will be your point of contact for any questions you may have.

Repayment of your Direct Consolidation Loan will begin within 60 days after the loan is disbursed. It is critical that you continue making payments, if required, to the loan servicer of the loans you want to consolidate until your consolidation servicer informs you that the underlying loans have been paid off.

To apply for a Direct Consolidation Loan, please click here.